The Social Problem that Lies Beneath the Booming Global Coffee Business
We love coffee. We could drink cup after cup and still want for more. Yet most of us are unaware that there is a social problem underneath the coffee business.
The global love for coffee has in fact kept the coffee industry booming, which makes us glad because it is a sign that the flow of coffee will continue to last. We are even encouraged to purchase our own coffee maker, whilst adding [phrase incl. coffee gear] to our search words in order to land comprehensive search results.
Currently, the overall global coffee industry has an estimated value of more than $90 billion and is expected to grow further at a rate of 5.5% annually through the year 2024. Moreover, the industry has been capable of generating as much as $200 billion in gross sales per year. The small farmers on the other hand, have to contend with the average income they have known for the past 20 year, which at times could even fall below the average.
Still, we are all willing to pay whatever price is asked just so we could drink coffee, particularly the specialty types enjoyed by Millenials across the globe. Unknowingly, that willingness all the more heightens the social problem emanating from the coffee growing business.
What is the Social Problem Behind the Global Coffee Business?
A company called Volcafe, recently reported 61 percent of coffee growers are actually selling their coffee at less than the actual cost of production. Volcafe is in the position to attest to this because it is in the business of sourcing single-origin and high-quality coffee from any country as a means to ensure that the supply chain will be able to meet the global consumer demand,
Volcafe’s market report states that there are 14 origins from which they source coffee; where small farmers trade their coffee through cooperatives and small holders based on at volatile prices; usually at less than a dollar for every pound of coffee they sell.
That portion of the report is the so-called social problem underneath the booming coffee business. Despite the continuing phenomenal growth of the global coffee industry, the growth does nothing to help uplift the conditions of the small individual coffee farmers connected to the coffee supply chain.
Factors Behind the Inability of Farmers to Earn Sustainably from the Global Coffee Trade
There are several factors contributing to the volatility of coffee pricing. One is the effect of climate change in a country, which tends to disrupt the nation’s ability to supply coffee.
Another factor is the fluctuation of currency valuation, as it can affect the price at which coffee can be traded in the global market. In most cases, the basic effects of the law of supply and demand — to which an oversupply simply means coffee roasters have low demand for coffee beans.
The pricing crisis has in fact made coffee producing an unsustainable source of income for the small farmers; but not to the major coffee market players who continue to reap the profits of a booming industry.
The demand for coffee now includes meeting the requirements of sustainable farming methods, as well as the food safety policies that roasters must observe. As a result, the small farmers are forced to sell their coffee produce at prices lower than the high cost of production.
Meanwhile, multinational coffee roasters have the ability to dictate how coffee moves in the supply chain and at what price they are willing to pay for the coffee originating from the most strategic location. Coffee product retailers on the other hand sell their coffee at a price that will still bring them the same level of profit.
Still, both the roasters and retailers continue to benefit from the booming coffee trade; unmindful that a great majority of the farmers linked to the supply chain, do not profit from the quality coffee that they proudly sell to the coffee-consuming public.
